Do you have to say what a loan is for?
Your loan purpose is the reason you want to borrow money. When you fill out a loan application, you might come across a section that asks why you are applying. Some lenders do this to match you with the right product. They can also use your loan purpose to assess risk and assign loan terms.
Applicants may have their own reasons for wanting a loan, but lenders will want to know what the funds will be used for. There may be certain loans better suited to certain funding needs than others, and a lender will likely want to make sure the loan suits the purpose.
When requesting a personal loan, be honest and forthright when it comes to your reasoning for taking out the loan. Your reason could include anything from debt consolidation to adding a new bathroom to your home to even buying new furniture.
Lying on a loan application can get you into trouble with the law. If you're convicted, you potentially face jail time and hefty fines, costing your deceit more than what you would've spent on the loan.
Personal loans are usually unsecured or secured by an asset and can be used for just about any non-business expense or purchase. They are term loans, meaning you receive the principal balance of the loan in one upfront payment and make monthly payments for a predetermined loan term.
You can generally use a personal loan for almost anything, including a wedding, a vacation, a medical bill, an emergency circ*mstance and more. However, there are also some expenses a personal loan usually can't be used to cover.
Lenders have the ultimate decision-making power when it comes to who they will provide loans to. In general, though, if you're denied a personal loan, it most likely has to do with your credit score, income situation, or DTI. Before you apply, check the lender's criteria to determine if you're likely to qualify.
An illegal money lender might be a friend or acquaintance, or they might simply be someone known around your area for lending money. They will often deal in cash, seldom provide any paperwork, and will demand very high interest rates (or they may not even be clear about what you have to pay back).
If you sign a sworn statement or testify to something that is false, you could be charged with perjury. Some examples of perjury in a divorce case include: Lying about your income on financial affidavits.
Personal lenders can call your employer if they want to. But most personal lenders will simply verify your income through a tax document or bank statement. If something is unclear, such as your current employment status, personal lenders can contact your employer to verify that you actually work there.
What to say to the bank when asking for a loan?
Your banker will need to understand some general information about your request, such as: How you plan to use the money. The amount of money you are requesting. Your desired loan terms.
Secured loans typically offer some of the lowest interest rates due to the collateral provided by the property. The loan is secured by the home, gold, or any vehicle, which reduces the risk for the lender.
You should not use a loan to fund weddings, vacations, other luxuries, monthly bills, or investments because doing so can quickly lead to overwhelming debt.
Lenders typically look for 2 months of bank statements from potential borrowers, which provides enough data to assess your income consistency, spending habits, account balances and other crucial financial information. It's possible the lender may ask to see more bank statements for additional insights in process, too.
Can You Apply for a Loan and Not Accept It? Yes. If a lender has approved your application for a personal loan, you're not required to take it. This is an important distinction from credit cards, where your account is opened immediately upon approval.
Spending habits
Lenders will usually closely examine your bank and credit statements for a period of up to six months to get an insight into your spending habits and to ensure you aren't exceeding your limits or making late payments.
Although loan amounts vary across lenders, the maximum amount for personal loans typically ranges from $500 to $100,000. In some cases, you may qualify for a loan larger than what you need. Before accepting any loan, consider what you can afford to repay and be sure you don't borrow more than what you can manage.
When you take out a personal loan, the cash is usually sent to your checking account. If you're using a loan for debt consolidation, however, some lenders will send the funds directly to your creditors.
Since personal loans are often unsecured loans, meaning they are not backed by any form of collateral, your credit score often plays a very important role in the approval process. As a rule of thumb, if your score doesn't meet a lender's minimum eligibility requirements, your chances of approval are low.
And much like with any other loan, mortgage, or credit card application, applying for a personal loan can cause a slight dip in your credit score. This is because lenders will run a hard inquiry on your credit, and every time a hard inquiry is pulled, it shows up on your credit report and your score drops a bit.
Is a loan better than credit card debt?
Personal loans tend to have lower interest rates than credit cards and are geared toward large, one-time expenses. Taking out a personal loan makes the most sense when you know you can make the monthly payments for the full length of the loan.
If you took out an unsecured loan
If you fail to live up to your end of the agreement, it will be reported to the credit bureau and your credit score is likely to take a nosedive. The problem with allowing your credit score to be damaged is that it can take years to rebuild your credit history.
Existing debt
If you already have any loans or credit cards, lenders will check what kind of debt it is, how much it is and whether you're making repayments. They want to see how much of a risk you are to lend to. If you're building up debt in other places, they may be concerned.
The bank will likely look at your credit history as well as your debt-to-income ratio. Since banks have higher criteria for their loans, the approval process can take a bit of time.
Dress in the way you would if you were meeting a client. Consider your appearance – ripped jeans and trainers are out! The bank manager will ask you questions about the operational and financial aspect of your business. They will expect you to be able to answer their questions confidently.
